Melot created 13 corporate entities, Swiss bank accounts to move funds

By MATEUSZ PERKOWSKI

Capital Press

A farmer in New Mexico has been sentenced to five years in prison after being convicted of tax fraud and deceiving the USDA to get farm subsidies.

Bill Melot, of Hobbs, N.M., was also ordered to pay $18.7 million in restitution to the U.S. government and undergo three years of supervised release.

A grand jury indicted Melot in 2009 for attempting to interfere with the administration of tax laws, for attempting to evade taxes, for willfully failing to file tax returns and for making false statements to USDA.

According to the indictment, Melot farmed wheat and peanuts on 250 acres in Lea County, N.M., and owned several gas stations but had not paid taxes since 1986.

Melot used "tax protest" schemes like establishing bank accounts for 13 corporate entities under his control to obscure money and property from the U.S. Internal Revenue Service, the federal government said.

For example, Melot deposited funds in a Swiss bank account, which impeded the IRS' knowledge of his assets due to that country's bank secrecy laws, the government said.

The government contended that Melot used fake Social Security numbers and tax identification numbers to open these accounts and to obtain direct and countercyclical subsidies from the USDA, according to court documents.

Melot argued that after paying for labor and other expenses, his farm and gas station businesses did not produce profits on which he had to pay taxes, according to court documents.

The corporate entities under Melot's control were lawfully established and he did not attempt to hide their existence from the IRS, said Steve Brittain, the farmer's attorney, during the trial.

Melot created the entities for legal reasons, such as limiting his liability in the event of a fire at one of the gas stations, and recognized them in bankruptcy proceedings, he said.

The government's contention that Melot owed more than $18 million "is based upon assessments that don't take into account the cost of running your business" and are thus greatly inflated, Brittain said.

A jury found Melot guilty on all counts after a trial last April, but the sentencing did not take place until Aug. 31.